Tuesday, November 27, 2018

French President Emmanuel Macron refuses to repeal gas taxes after Yellow Jacket protests.

French President Emmanuel Macron. Reuters. 

French President Emmanuel Macron has refused to repeal gas taxes despite the "Yellow Jacket" protests. Reuters. Macron said he empathized with people affected by the tax but would not be intimidated by "thugs". The tax hike was an attempt to force France to switch to greener energy. Macron also pointed out that generous social programs that France has must be funded by taxes. Macron did propose to review the tax rate on fuel quarterly based on international oil prices. 

My Comment:
I don't think Macron is handling this crisis very well. The tax increase was a poor descion in the first place as France isn't a big contributor to global pollution and it was always very punitive to normal people. But even then calling people thugs probably isn't going to play well. Sure, he was talking about the minority of protesters that are violent and that probably is an accurate term to call them, but it is going to anger everyone who supports the goals of the Yellow Jacket/Vest protest. 

His proposed solution isn't much of a break for the people affected by the tax hike. Even if it is based on oil prices it is still going to be an increase over what it was initially. Nobody wants to pay more on taxes, especially on something that you can't avoid using.  

Taxing critical commodities like oil and gas seems like a great way to ruin the economy as well. Any tax raise at all will damage the economy. First normal people will see more of their budget going into their cars. Public transportation will get more expensive as well. Businesses will have to raise their prices to help pay for the increase transportation costs and will pass that on to consumers. Normal people won't be spending as much money and won't be able to save either. Everyone understands this and that's a major reason why people in France are so sick of Macron right now. 

Macron does have a point though. In order to pay for social programs you have to have high taxes. The obvious solution to that is to cut those social programs, but France isn't going to do that. That leaves Macron in a bad position. He pretty much has to raise taxes but doesn't have a way to do so that will keep his country happy. 

Still, it's not like Macron is vulnerable right now. He has the position of president until 2022. He might very well lose that position by then but there isn't much to be done about his policies until then. He is probably counting on anger over these tax hikes to have faded by then. 

I don't know if he can count on it. This is an organic protest and not one funded by astroturf. It's real and the anger of these protesters go beyond the tax hike. They are mad about that as well but it's really more about how everyone feels broke despite living in a decently rich country. Taxes are so high in general that nobody can afford to live. 

I expect these protests to continue and for nobody to be placated by Macron's proposal. It's going to take a lot more than trying to set the tax rate to oil prices in order to stop this movement. He needs to provide real relief for high taxes and I don't think he can do it. What that means for France is an open question but I am expecting more civil disorder and riots. 

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